question archive Stock A has an expected return of 20%; stock B has an expected return of 5%
Stock A has an expected return of 20%; stock B has an expected return of 5%
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Stock A has an expected return of 20%; stock B has an expected return of 5%. What is the expected return on a portfolio is comprised of 67% of Stock A and 33% of Stock B? %
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Answer:
Weight of stock A = 67% or 0.67
weight of stock B = 33% or 0.33
Expected return of stock A is 20%
Expected return of stock B is 5%
| Stock | weights | Expected return | Portfolio return |
| A | 0.67 | 20% | 13.4% |
| B | 0.33 | 5% | 1.65% |
| Total | 15.05% |
Portfolio return = weights * Expected return
The Portfolio return is 15.05%
